These NCDs come with tenure ranging from 400 days to 6 years. Interest rates on them range between 11% and 12.5%, which are 1.5-2.5% more than the rates offered by bank deposits.

They also offer you the option of monthly interest, annual interest, cumulative option as well as option to double your money. "Investors whose income is not subject to tax or pay a marginal tax of 10%, could allocate 5- 20% of their fixed income portfolio towards such NCDs," says Rupesh Bhansali, head (distribution), GEPL Capital, a broking firm. Those in the higher tax slabs can look at tax-free bonds for superior post-tax returns.

Experts also ask investors to look at the ratings of the NCD, and individual cash flow requirements and time frame of investments before investing. "Go for an NCD that commands a higher rating. Since these issue sizes are small, liquidity is likely to be low. So invest with an objective of holding till maturity," says Anup Bhaiya, MD and CEO, Money Honey Financial Services.

Muthoot Finance and Srei Infra Finance carry a higher rating of AA-, while Manappuram Finance carried an A+ rating. "Muthoot Finance and Manappuram are primarily into the gold loan business, which has seen a series of regulatory changes by the RBI over the last couple of years,"

says Bhansali. He prefers Srei Infra followed by Muthoot Finance and Manappuram Finance. Experts ask investors not to get carried away by higher rates and invest only a small portion of their portfolio in such NCDs.

Work Out the Post-tax Returns Muthoot Finance and Manappuram Finance give you the option of monthly income as well as an annual income, but Srei Infra has only anannual interest payment option.

When it comes to interest rates, Srei Infra pays 11.5% for a five-year NCD, while Muthoot and Manappuram pay 12% for a five-year tenure. Srei Infra, however, offers an additional 0.25% to existing bond holders as well as shareholders. If you wish to invest for five years, you can opt for Muthoot Finance. "If you are a shareholder of Srei Infra, and wish to invest for 5 years, opt for it. However, if you need a monthly income to meet your expenses or if you wish to invest for a lower tenure of merely 400 days, opt for Muthoot Finance," says Bhaiya.